Government eager to formalise informal sector

Martin Kadzere
Zimbabwe will carry out a comprehensive study on the informal sector to guide the Government in making policies meant to grow and integrate the sector into the mainstream economy, a Cabinet minister has said.

Speaking to The Sunday Mail Business recently, Finance and Economic Planning Minister Patrick Chinamasa said Government is in the process of engaging FinMark Trust, an independent South African based institution that promotes financial inclusion and regional integration to assist in the process.

FinMark, which has since announced plans to establish base in Zimbabwe, previously carried out a Finscope Survey in 2012.

The firm noted that the informal sector is the source of livelihoods for about 5,8 million Zimbabweans, constituting over 60 percent of the economically active people.

The International Monetary Fund lists Zimbabwe as the world’s second largest informal economy, after Bolivia.

In a working paper titled “Shadow Economies Around the World: What Did We Learn Over the Last 20 Years”, of the 158 economies surveyed, Zimbabwe, scored 60,6 percent after Bolivia, which topped at 62,3 percent.

The IMF says the shadow economy includes economic activities which are hidden from official authorities for monetary, regulatory, and institutional reasons.

“I want them to carry out a survey on the informal sector so that we have clear data on what is happening in that sector,” said Minister Chinamasa.

“In particular, we want to know what businesses they are doing there and what (are their) sizes. We also want to know where these people are located; where are they operating from? When we have that information we can make correct policy decisions.”

At the turn of the millennium, Zimbabwe was slapped with economic sanctions by Britain and her allies over the country’s land reform program.

Several companies either closed or scaled down, resulting in a substantial number of formal employees losing their jobs.

The sanctions agenda, which meant to cripple the economy, instead created empowered individuals who no longer rely on formal employment for sustenance.

The culture of being an employee in big businesses has been replaced by an empowerment mentality in which the man in the street has effectively become his own boss.

While a lot of workers have been thrust into this situation as a result of job losses in the formal sector, there has been a substantial redistribution of wealth from big business.

Minister Chinamasa said the economy has proved its resilience, thanks to the informal sector.

“Just one statistic which I normally use; at the turn of the millennium, we had something like 2,5 million workers in the formal sector. As the economy was hit hard through sanctions and companies closed, the formal sector collapsed while the informal sector grew.

“Right now, many workers, some of them very skilled, have gone on to formed their own informal businesses, and that has sustained this country.

“But we really don’t know what is happening. The survey will help us to identify those people. It will be very easy to assist them in terms of training, skills development and capital.

“That is where we want to go. But the truth of the matter is that there is a lot of data, which is outside the formal sector, outside Government and we can only obtain that data through surveys, otherwise when you look at our economy and you judge it against certain indicators, they will say we are collapsing tomorrow, but we don’t collapse because there is something that is happening in the economy which is not being captured. Just look at our roads, the congestion that is on our roads.